Panasonic maker Matsushita Electric Industrial and Sanyo Electric may tie up in the first reorganisation move among Japan's top electronics makers, the Yomiuri newspaper
reported on Monday, but the two companies quickly rejected the report.
Sanyo shares leapt 9.2 percent after the Yomiuri paper said a plan had been prepared for business and capital links between the two companies and they could merge in the future, with the main shareholders in struggling Sanyo looking to sell.
Matsushita shares rose 1.2 percent, above a 0.9 percent rise in the benchmark Nikkei stock average . Trading in both stocks were halted for a short time by the Tokyo Stock Exchange.
Sanyo suffered three years of losses up until March 2007 from price wars and an earthquake at its microchip plant and has been restructuring with the help of shareholder Goldman Sachs .
Major shareholders, which also include Sumitomo Mitsui Banking Corp and Daiwa Securities SMBC, have judged it would take time for Sanyo to turn around its businesses itself, and have been looking for a major corporation with financial strength as a buyer, the newspaper said, quoting unidentified sources.
Matsushita and Sanyo together have sales of some 11 trillion yen ($105 billion) and would create Japan's biggest electronics maker if they combined.
Matsushita spokesman Akira Kadota denied that the company was considering such move. Sanyo spokesman Hiroshi Tsuchiya also said the report was not true, adding there was no ongoing tie-up talks with Matsushita or any other companies.
Sanyo issued 300 billion yen worth of preferred shares to Goldman, Sumitomo and Daiwa at a deep discount in 2006 to bolster its finances, giving them two-thirds of total voting rights if the shares were converted to common stock.
Matsushita may buy preferred shares in Sanyo from the three financial institutions, with a possibility of combining the two businesses in the future, the paper added.
The paper said the talks could be prolonged because of the two companies' overlapping operations and Sanyo's struggling home appliance and chip businesses.
Sanyo has seen a nascent recovery recently as it focuses its resources on solar cells and rechargeable batteries, its top earners. It has forecast a net profit for the year to March 2008.
Sanyo shares jumped 22 yen to 260 yen while Matsushita shares rose 25 yen to 2145 yen when trading resumed after the two companies issued denials.